Relations between gov’t agencies looked from petrol-related controversy
MOF vows to clarify petroleum cost prices
MOF, MOIT disagree on petrol price control
Finance Minister Vuong Dinh Hue.
If there was the poll of “Man of the Month” in Vietnam, perhaps Minister of Finance, Vuong Dinh Hue, would be selected as the “Man of September”.
He will be chosen because for a very long time, there is a Minister who “declared war” against the interest group in the petrol business to defend the interest of over 80 million Vietnamese.
Minister Hue did not hesitate to bring to the light the in-transparency of the State-owned Vietnam Petroleum Import Export Corporation (Petrolimex), which holds a monopoly in trading petrol in Vietnam. This group always claims losses but it cannot prove the loss. Hue frankly stated: “Any corporation that is incapable to do its job, it can withdraw…. We are ready to dissolve it to establish another corporation. The State does not threaten anyone and no one can threaten the State.”
Obviously, when the petrol market is controlled by three companies (Petrolimex with 60 percent, PV Oil and Saigon Petro with 30 percent each), there is no competitive and fair market. The State, therefore, needs to intervene in this market.
Minister Hue did not only make statement. The Finance Ministry has set up three working groups to inspect petrol price. The move stirs up a new hope: the appearance of a new point of view in economic management, which makes the operation of state-owned businesses which hold monopoly in the economy transparent.
Looking over the entire economy of Vietnam, not only the petrol market but also many other fields of business lack transparence, for example electricity, securities, etc. Can the Ministry of Finance deal with these fields like it does with the petrol sector?
The case of the Electricity of Vietnam (EVN) Group should be considered as an example. Raising power prices has been always employed by EVN as the solution to deal with its shortage of capital. This State-owned group always sings the song “if the government does not permit EVN to increase electricity price, EVN is incapable to ensure sufficient supply of power to the economy.” This “song” is similar to that of Petrolimex “If the state does not allow the rise of petrol price, the petrol supply system will break.”
The public has asked EVN to make public the production cost of power many times. However, the price for electricity is always on the rise but the product cost of electricity is still a secret.
EVN recently proposed to raise electricity price in September 2011, but its proposal was rejected by the Ministry of Finance because “power price should not be adjusted quarterly to avoid adverse impacts.”
Though the Finance Ministry did not agree with EVN’s proposal, it sent a document to the Ministry of Industry and Trade to suggest special solutions in a bid to deal with EVN’s capital-related difficulties. Accordingly, the government may give guarantee to EVN’s loans without assessing this group’s financial method of projects that need loans.
The question is “this is an appropriate solution for EVN at this time?”
According to EVN, this group’s loss by August 2011 is more than VND31.56 trillion ($1.5 billion) and it has no sources for paying the debt. This group hopes that if it is allowed to raise power price, part of the money will be used to pay debts for local groups (around VND22 trillion or $1 billion).
Like petrol prices, power price has always increased based on proposals from the EVN and the calculation of related ministries and agencies. However, it is unclear whether the price is reasonable or not because important factors like power price structure, the use of state capital, the effectiveness of business governance, etc. are not made clear.
EVN has been favored but it seems to have trouble with this group in fulfilling its mission. If investment incentive is still granted to this group, the use of the state’s limited resources will be ineffective. The lesson from the Vietnam Shipbuilding Industry Group (Vinashin) is still fresh.
After the petrol sector, the people are waiting for a similar “declaration of war” of the Minister of Finance against the power sector, specifically the electricity price. DNSGCT